While many of us have life insurance, but many of us are unsure how much cover to have. Unfortunately, this usually leaves us under-insured.

If you have life insurance, usually included in your superannuation, chances are you’re one of 16 million Australians that are underinsured. Being underinsured when it comes to life insurance can catch families out if—knock on wood—a loved one passes away unexpectedly.

According to Rice Warner Actuaries in their Underinsurance in Australia report released in 2017, Australians are underinsured to the tune of 4.9 trillion—yes, trillion with a T—dollars.

When it comes to total and permanent disability insurance (TPD), Australians are underinsured by $7.36 trillion.

So we teamed up with the team at Savvy to discuss how much life insurance is enough to steer you or your family through hard times?

The average income and the right level of cover

According to the report, approximately 94% of working Australians have some level of life insurance cover. The average amount covered is $344,000, which is about four and a half times the median Australian income (around $75,000 p.a.).

However, this statistic is skewed by the top earners, who may have ten or twenty times this amount of cover. The median amount of cover is about $143,000, which is only twice the median Australian income.

When it comes to TPD insurance, 81% of Australians have coverage, with the average policy allowing $237,000, the median being $99,500.

For income protection insurance, which is more likely to be used (as it covers redundancy and non-fatal, prolonged illnesses), the median level of cover is 36% of total income. Currently only a third of the working population has some form of income protection insurance.

This under insurance can have severe effects on families struck with bad luck. It not only restricts the lifestyle of claimants but may have flow on effects like missing debt payments or forcing the government to intervene with benefits payments.

So what is the right level of life insurance coverage?

Rice Warner in its report suggests that a 30-year old couple with two dependents needs eight times the family income for life insurance to replace an income; four times the family income for TPD; 85% of the family income for income protection insurance.

“In uncertain times, it’s more important than ever to review your life insurance policies and make sure you have the right level of coverage,” says Savvy CEO Bill Tsouvalas. Tsouvalas is a finance and insurance broker and urges families to review their life insurance policies regularly. “The attitude of ‘my super has me covered’ isn’t enough. That level of coverage might be based on when you first started working. A far cry from the needs of a couple in their mid-30s with a couple of children. You may think you have disability or income protection insurance—but are you willing to take that risk when you actually need it?”

Families should do the financials and work out if their cover is adequate and consider including other insurance policies such as TPD and income protection if they don’t already have them. Tsouvalas says it might be an extra expense, but worth every cent.

“Even if you never use it, it gives you peace of mind. Not just for you, but your loved ones.”